BSNL VRS Compensation Is Fully Exempt as Retrenchment Compensation: ITAT Pune

By CA Vijayakumar Shetty Income Tax Judiciary August 27, 2026

TaxGuru Citation: 2026 taxguru.in 11806
Case Name: Vikas Vasant Tol Vs ITO (ITAT Pune)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2020-21
Courts: All ITAT, ITAT Pune

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Vikas Vasant Tol Vs ITO (ITAT Pune)

Summary: The Pune ITAT held that compensation received by employees under the Bharat Sanchar Nigam Limited Voluntary Retirement Scheme (BSNL VRS-2019) constitutes retrenchment compensation and is a capital receipt fully exempt from tax under Section 10(10B) of the Income-tax Act, 1961, and not merely eligible for the restricted ₹5 lakh exemption under Section 10(10C). The appeals related to assessment years 2020-21 and 2021-22, where the assessees, former BSNL employees, had initially offered the compensation to tax after claiming exemption under Section 10(10C), but subsequently claimed exemption of the entire compensation under Section 10(10B). The Addl./JCIT(A) had dismissed the appeals on account of delay without adjudicating the merits. Relying on earlier Coordinate Bench decisions involving similarly situated BSNL employees, particularly Rajendra Himmatrao Patil vs. ITO and other recent Pune ITAT decisions, the Tribunal held that the compensation was retrenchment compensation covered by Section 10(10B) and constituted a capital receipt exempt from tax. The Tribunal also condoned the 60-day delay in filing two appeals and, finding no contrary material from the Revenue, set aside the orders of the Addl./JCIT(A) and allowed the appeals. The assessees were directed to submit revised computations of income before the respective Jurisdictional Assessing Officers claiming exemption under Section 10(10B), following which the Revenue authorities were directed to verify the computations, recompute the tax liability and grant any resulting refund. The separate claim for full exemption of ₹13,29,910 towards leave encashment was withdrawn and therefore was not adjudicated. The order was pronounced in the open Court on 25 August 2026.

The Pune ITAT held that compensation received by employees under the BSNL Voluntary Retirement Scheme, 2019 constitutes retrenchment compensation and a capital receipt, fully exempt from tax under Section 10(10B). It is not merely eligible for the restricted ₹5 lakh exemption under Section 10(10C).

The Tribunal set aside the Addl./JCIT(A)’s orders, which had dismissed the assessees’ appeals because of delay. Following earlier Pune Tribunal decisions involving similarly situated BSNL employees, it directed the assessees to submit revised computations of income to their respective Assessing Officers. The Revenue must verify these computations, recalculate the tax liability and grant any resulting refund.

A 60-day delay in two appeals was also condoned. The separate claim concerning full exemption of ₹13,29,910 leave encashment was withdrawn and therefore not decided.

List of Cases Discussed / Relied Upon

Shraddha Pralhad Arote & Others vs. ITO,ITA Nos.262 & 261/PUN/2026, order dated 24.03.2026 — cited as a Pune ITAT decision involving the same BSNL VRS-2019 exemption issue.
Meghmala Sudhir Pathak & Others vs. ITO,ITA Nos.290 & 293/PUN/2026, order dated 24.03.2026 — cited as a Pune ITAT decision involving the same issue.
Sanjay Bajarang Todali & Ors vs. ITO,ITA No.2090/PUN/2026 & Ors, order dated 30.06.2026 — cited as a recent Coordinate Bench decision on BSNL VRS-2019 compensation.
Ravindra Kumar Saxena & Anr,ITA Nos.2655/PUN/2026 & Ors, order dated 31.07.2026 — cited as a recent Coordinate Bench decision on the same issue.
Raju Goral & Ors vs. ITO,ITA Nos.2224/PUN/2026 & Ors, order dated 28.07.2026 — cited as a Coordinate Bench decision holding BSNL VRS-2019 compensation exempt under section 10(10B).
Prakash Dhondiram Gavali vs. ITO, ITA No.1214/PUN/2026, order dated 21.07.2026 — cited as a Coordinate Bench decision involving the same BSNL VRS compensation issue.
Tanaji Kedari Sapkar vs. ITO, ITA No.2478/PUN/2024, order dated 07.01.2025 — cited as a Tribunal decision relied upon in support of the exemption claim.
Avinash Arvind Kulkarni & Anr vs. ITO,ITA Nos.1043 to 1046/PUN/2026, order dated 21.05.2026 — cited as a Coordinate Bench decision on BSNL VRS-2019 compensation.
Rajendra Himmatrao Patil vs. ITO,ITA Nos.302 & 303/PUN/2026 & Others, order dated 27.03.2026 — followed on identical facts; the decision held BSNL VRS-2019 compensation to be retrenchment compensation and a capital receipt exempt under section 10(10B).
Jayeshkumar Tulsidas Sutaria Vs. ITO,(2026) 183 taxmann.com 587 (Ahmedabad-Trib.) — relied upon regarding exemption under section 10(10B) and the claim raised at the appellate stage.
Harish Kumar Vs. ITO,(2025) 175 taxmann.com 379 (Chandigarh-Trib.) — relied upon for treating BSNL VRS compensation as eligible for exemption under section 10(10B).
Dayal Singh Vs. ITO,ITA 519/CHD/2024 — cited as a decision relied upon concerning the nature and exemption of retrenchment compensation.
Suresh Pal Chauhan vs. ITO,(2023) 154 taxmann.com 529 (Chandigarh-Trib.) — relied upon regarding exemption under section 10(10B).
Hindustan Photo Film Workers Welfare Centre Vs. Govt. of India,(2017) 79 taxmann.com 298 (Madras) — relied upon concerning the applicability of section 10(10B) to employees covered by the scheme.
CIT (TDS) Vs. Hindustan Photo Film Workers Welfare Centre,(2021) 129 taxmann.com 356 (Madras) — cited in relation to the Hindustan Photo Film Workers Welfare Centre litigation.
Union of India Vs. M/s. Hindustan Photo Film Workers Welfare Centre and others,Special Leave Petition (Civil) Diary No.37247/2017 — cited in relation to the same litigation.
Shree Rajeshwar Sharma Vs. ITO,ITA No.870/CHD/2018 — cited as a decision relied upon concerning the claim under section 10(10B).
CIT Vs. Mahalakshmi Textile Mills Ltd.,(1967) 66 ITR 710 (SC) — relied upon regarding the Tribunal’s power to consider a claim on another legal ground.
PCIT Vs. Karnataka State Cooperative Federation Ltd.,(2021) 128 taxmann.com 1 (Karnataka) — cited among the decisions relied upon.
CIT Vs. Pruthvi Brokers & Shareholders,(2012) 23 taxmann.com 23 (Bombay) — relied upon regarding the raising of additional claims before appellate authorities.
Vijay Vishin Meghani vs DCIT,[2017] 398 ITR 250 (Bombay) — cited regarding condonation of substantial delay attributable to professional advice.